Analysts at the investment bank believe the new BlackBerry 10 operating system will not become a “strong” third option when compared to Apple’s (AAPL) iOS and Google’s (GOOG) Android.

However, in a research note to clients, Morgan Stanley said it now sees “room in the handset market for niche mid-range players.” It added that gross margin will likely surpass consensus projections this year as users of BlackBerry 6, an older operating system, move to later versions.